As a general rule, your monthly payment should be one-third of your monthly income. But, When it comes to providing pre-approvals for would-be homebuyers, lenders today are more careful than they were in the years leading up to the market crash 2008, and that means your financial picture will be more rigorously scrutinized to determine your credit-worthiness and develop your max approval amount. Trust me, that's a good thing. The last thing you want is to be house poor. Having a great place to live that you can't enjoy, furnish or even leave because you have no money left won't be fun.
Consider your take-home pay - what actually goes into the bank after taxes, health insurance, and savings for retirement and college. Then add up all your monthly bills, not just debt but also things like utilities, phone, and groceries. You want to feel comfortable that you can cover all your household obligations while still meeting your other financial goals and keeping six months of expenses in an emergency fund.
That's why it's so important to consider all of your monthly expenses related to buying a home. Beyond the principal, interest, taxes, and insurance that the lender, there are other line items to weave in that will help you determine your purchasing power and also help you to be comfortable from month to month. Here few examples to consider:
Increased commuter costs, Higher utility bill, Homeowner's Association, Home improvements, Landscaping
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